FX Breakout Monitor: EURUSD making an attempt

Forex 5 minutes to read

John Hardy

Head of FX Strategy

Summary:  The ECB did all it could do exceed the bar of dovish expectations today and EURUSD is poking at the key local breakout level once again. This could finally set a fresh trending move in motion if a break can hold through Friday’s close.


For a PDF copy of this edition, click here.

I noted in a tweet earlier today that the EURUSD range seen over the prior three months (just over 3%) was the lowest since the euro began trading, something that is unsustainable unless we are heading toward a single world currency. The other episode with volatility that almost matched these lows came back in early 2014 and was followed by one of the most pronounced and persistent trends in EURUSD history, driven by the policy divergence of a hiking Federal Reserve and a European Central Bank about to launch full-scale QE. 

Today, the ECB managed to get out front ahead of dovish expectations, announcing a new TLTRO facility now rather than later and dramatically slashing inflation and growth forecasts for 2019 while delaying guidance on the timing for a first hike to beyond the end of this year. EURUSD is poking at new local lows on this dovish performance. Elsewhere, the USD is firm across the board outside of indifferent price action in USDJPY.

Breakout signal tracker

We add a EURUSD short and an AUDUSD short at current levels to our signal tracker with the operating assumption that these pairs will sustain their breaks lower through the key US jobs data tomorrow.
Source: Saxo Bank
Today’s FX Breakout monitor

Page 1: EURUSD making its move over the ECB today and it will be important for the close at new lows to hold into the end of this week’s trading. AUDUSD has stuck lower but needs to find more momentum to keep the focus lower in the wake of tomorrow’s US jobs report.
Source: Saxo Bank
Page 2: ZAR is now joining TRY in falling more persistently versus the stronger US dollar with USDMXN close to joining for a break higher for the first time in a while. USDSEK and USDNOK are also poking at fresh highs today and the precious metals remain in a local funk – somewhat interesting that they are getting a signal from the strong USD more than the dovish ECB (the latter would have been expected to provide more support).
Source: Saxo Bank
Chart: EURUSD

We revisit the EURUSD chart once again, and some traders will be reluctant to join in selling the local break after multiple small range breaks in both directions have led nowhere. Certainly, a closing level for this week that comes in near the lows today and even beyond the 1.1217 major low from last November would help the bearish case going into next week.
Source: Saxo Bank
REFERENCE: FX Breakout Monitor overview explanations

The following is a left-to-right, column by column explanation of the FX Breakout Monitor tables.

Trend
: a measure of whether the currency pair is trending up, down or sideways based on an algorithm that looks for persistent directional price action. A currency can register a breakout before it looks like it is trending if markets are choppy.

ATR
: Average True Range or the average daily trading range. Our calculation of this indicator uses a 50-day exponential moving average to smooth development. The shading indicates whether, relative to the prior 1,000 trading days, the current ATR is exceptionally high (deep orange), somewhat elevated (lighter orange), normal (no shading), quiet (light blue) or exceptionally quiet (deeper blue).

High Closes / Low Closes
: These columns show the highest and lowest prior 19- and 49-day daily closing levels.  

Breakouts
: The right-most several columns columns indicate whether a breakout to the upside or downside has unfolded today (coloured “X”) or on any of the previous six trading days. This graphic indication offers an easy way to see whether the breakout is the first in a series or is a continuation from a prior break. For the “Today” columns for 19-day and 49-day breakouts, if there is no break, the distance from the current “Quote” to the break level is shown in ATR, and coloured yellow if getting close to registering a breakout.

NOTE: although the Today column may show a breakout in action, the daily close is the key level that is the final arbiter on whether the breakout is registered for subsequent days.

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

International

Trade responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.